HECM by the Numbers: Clarity Before Conclusions

Most conversations about reverse mortgage loans start with opinions. 

They should start with facts.

Below is a numbers-first breakdown of a HECM (Home Equity Conversion Mortgage), the FHA-insured reverse mortgage loan, so homeowners, families, and advisors can evaluate it with clarity instead of assumptions.

$0: Payments required for the life of the loan

No principal or interest payments are required while the borrower lives in the home and meets loan responsibilities. The balance accrues and is settled later, not along the way.

(A borrower can choose to make payments, which may bring further benefit & flexibility. As always, we work with the individual to discuss all options so they can make fully informed decisions.)

1: HUD-approved counseling session

Every borrower completes one independent, HUD-approved counseling course before moving forward.

This is not sales; it’s consumer protection, designed to ensure understanding, alternatives, and fit.

2%: FHA Mortgage Insurance Premium (MIP)

The upfront FHA MIP is 2% of the appraised value (up to FHA limits). This insurance is what enables:

• Non-recourse protection

• Continued access to funds

• Protections for borrowers and heirs

Think of it less as a fee and more as what makes the most important protections possible.

3: Funding options

HECMs are flexible by design. Borrowers can choose one, or a combination*:

1. Lump Sum – Fixed rate, accessed upfront. 

2. Tenure – Guaranteed monthly payments for as long as the borrower lives in the home

3. Line of Credit (LOC) – Grows over time and can be used strategically

Different needs. Different solutions. Same loan.

(*Lump Sum option is "one and done" and not combined with other options)

4: The “Nevers”

A properly structured HECM means the borrower will:

• Never give up title

• Never make a required monthly mortgage payment

• Never have to leave the home*

• Never owe more than the home’s value

*As long as borrower responsibilities are met.

These are contractual protections, not marketing language.

5: Borrower responsibilities

A reverse mortgage loan removes payments, not responsibility. Borrowers must:

1. Use the home as their primary residence

2. Pay property taxes

3. Maintain homeowners insurance

4. Maintain the property

5. Certify occupancy annually

Failing to fulfill these obligations, not the loan itself, is what creates problems.

6 months: Heirs’ decision window

When the loan becomes due (typically after the last borrower passes):

• Heirs have 6 months to decide whether to:

  • Sell the home

  • Refinance and keep it

  • Turn it over to the lender

• Two 90-day extensions are commonly available if progress is being made

This is a process, not a scramble.

7 out of 10:  Likelihood of needing Long-Term Care

Statistically, 7 of 10 people age 65 will need some form of Long-Term Care. A HECM isn’t LTC insurance, but it can be a liquidity strategy when care costs show up uninvited.

12 months — Temporary absence allowance

Borrowers can be out of the home for up to 12 months for:

• Medical care

• Rehabilitation

• Assisted living

Before FHA considers the move permanent. This matters more often than people expect.

50%: Longevity reality

Roughly half of retirees will outlive their statistical life expectancy. That’s not a planning error, it’s a planning challenge (and a good 'problem' to have). Longevity risk is where flexibility becomes valuable.

62: Minimum qualification age

The youngest borrower must be 62 or older. Age directly impacts available proceeds and strategic design.

95%: Non-recourse purchase protection

Heirs are only responsible for 95% of the home’s appraised value, even if the loan balance is higher. The remaining risk is absorbed by FHA, not the family.

This is only if Heirs choose to purchase the home AND the loan balance exceeds the appraised value. 

If they choose not to purchase the home and there is no equity, they simply sign the title to the lender and walk away with no responsibility or debt on the home.

(Note: If there is equity and Heirs choose to sell the home, they receive the proceeds just like any other real estate transaction.)

$100: Minimum to establish a Line of Credit

It can take as little as $100 to open a HECM LOC. Why that matters: unused LOC funds can grow over time, creating future borrowing power without re-qualifying.

This is where a borrower who chooses to make payments can add significant long-term benefit and financial flexibility. 

100%: Income-tax-free access

Money drawn from a HECM is loan proceeds, not income. That means 0% federal and state income tax when funds are accessed. 

(As always, individual tax situations vary, so consult with your tax advisor, estate planning attorney, and/or financial advisor.)

The bottom line

A HECM is not a desperation move. It’s not a silver bullet. And it’s not right for everyone.

But by the numbers, it is one of the most misunderstood financial tools available to retirees, and one of the most flexible when used early and intentionally.

If you want to see how these numbers apply to your home, your timeline, and your family, schedule a no-pressure review and decide from there. We'll save time for opinions as we discuss facts.